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The Essential Role Real Estate Companies Play in Preventing and Combating Money Laundering and the Financing of Terrorism

The term "money laundering" is often used in everyday life, but what does money laundering actually imply, and how it is dealt with?  

The official definition of money laundering is the "process by which the perpetrators of criminal activities conceal the origin of the goods and income (advantages) obtained illicitly, transforming the liquidity arising from these activities into legally reusable capital by disguising the origin or the true owner of the funds", in other words, it is a process which aims to hide goods, capital or products in order to give them a final appearance of legitimacy, thus seeking to disguise the criminal origin of capital, goods or products. 

The laundering process encompasses three distinct and successive phases: 

Placement: Assets and proceeds are placed in financial and non-financial circuits; 

Circulation: Goods and income are subject to multiple and repeated operations, with the purpose of distancing them from their criminal origin, erasing (whitewashing) the traces of their provenance and ownership; 

Integration: The goods and earnings, after being recycled, are reintroduced in the legitimate economic circuits (for example, through their use in the acquisition of goods and services). 

Thus, we can say, in a simplistic way, that money laundering refers to operations based on money obtained illicitly, and is therefore considered a crime and is punished with a prison sentence of 2 to 12 years. 

In addition to money laundering, another crime that we have to be aware of, and actively try to combat, is the financing of terrorism, which, as its name indicates, refers to the direct or indirect supply or collection of goods of any kind and products or rights that can be transformed into funds, intended to be used or knowing that they can be used (in whole or in part) in the planning, preparation or commission of a series of crimes against the physical integrity of a civilian.  

Unlike what happens in money laundering, where the fundamental purpose is to hide the origin of the funds, in terrorist financing one of the main purposes is to hide the purpose for which the funds are intended. Preventing and even combating this criminal practice is a huge challenge, essentially because the amounts involved are usually relatively low, not attracting as much attention, making it more difficult to detect and suspect the operations in question.  

What is being done to combat these two crimes within real estate mediation? 

Real estate companies have a great responsibility in identifying suspicious operations of money laundering, as well as to support professionals in the sector in complying with the obligation of communications that may seem suspicious to them. 

In this way all real estate mediation entities have the obligation to communicate to the regulating entity all the real estate transactions and lease contracts made whose monthly rent is equal or superior to 2.500 euros on a quarterly basis. 

In addition, real estate mediation companies have a set of mandatory duties established in the Regulation; 

The Duty of Control: that is, all entities must define and adopt the best procedures to safeguard their business. 

The Duty of Identification and diligence: they have the duty to identify any transaction that may seem suspicious to them, or that there are doubts about the veracity of the clients' identification data. 

The Reporting Duty: this duty refers to the fact that they must report all transactions as mentioned above as well as the fact that all entities must appoint a Compliance Officer, who will act as the person responsible for the communication between the Obliged Entity and IMPIC. 

And finally, the Duty of Conservation: in which all entities have the duty to preserve for seven years certain documents or information, namely in the scope of the identification duty. 

For the reasons mentioned above, Casaiberia has made a great effort in the training of its agents and also in the cooperation with the entities involved as IMPIC UIF and DCIAP and in the evaluation of the European Commission in March 2022 in which we were, among others, one of the companies that responded to that commission to ensure the entire compliance process and its application in our daily lives. 

On balance, the effort made to combat money laundering and the financing of terrorism is clear.  We are witnessing an increase of bureaucracy and responsibility of the Real Estate Entities that are themselves obliged to promote control and prevention by internally adapting their own measures and organisations so that together we can significantly reduce these crimes. 

Written by Claúdia Ferreira